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Pharmaceuticals in State Prisons

How departments of corrections purchase, use, and monitor prescription drugs

Overview

Adults who are incarcerated have a higher-than-average prevalence of infectious diseases, hypertension, asthma, arthritis, mental illness, and substance use disorders, often in combination. Since departments of corrections (DOCs) are legally obligated to treat individuals in their custody, they—like all health care purchasers in this country—face the challenge of pharmaceutical prices that seem to rise constantly, and sometimes rapidly. Yet unlike the country’s two largest publicly supported health insurers—Medicaid (for eligible low-income people) and Medicare (for eligible individuals 65 years and older and people with disabilities)—relatively little is known about how each DOC purchases pharmaceuticals, what they spend for them, and what policies they adopt to govern their use.

A number of complex and interrelated elements affect the delivery and cost of pharmaceuticals in a correctional setting, including the organization of the prison system’s overall health care delivery system, its drug-purchasing strategy, its selection of preferred drugs (known as the formulary), and copayment requirements. The decisions a state makes about these questions can help improve the quality and cost-effectiveness of a state’s correctional health program and contribute to a well-coordinated and integrated state health care system.

In an effort to better understand the role of pharmaceuticals in the state correctional setting and budget, and in a state’s overall health care strategy, The Pew Charitable Trusts, in partnership with the Vera Institute of Justice, administered a survey in 2016 to each state’s department of corrections, receiving responses from every state except New Hampshire. Respondents were asked how much they spent on prescription drugs, what their highest-cost drugs were, whether they charged incarcerated adults copayments, and whether they had access to the federal Health Resources and Services Administration’s (HRSA) 340B discounted drug pricing program through an agreement with an eligible provider.

The research found:

21 DOCs named drug costs as one of their agency’s primary health cost drivers. Other states cited cost drivers that had significant drug-spending implications: an aging prison population and an increase in disease severity among individuals of all ages entering prison.

Few DOCs could report their total spending on pharmaceuticals, either because they contract with private vendors to provide their prison health care and the cost of pharmaceuticals is folded into the overall per inmate per month vendor payment, or because their accounting systems do not separately track pharmaceutical spending.

Among 10 of the 11 states that could report total spending on pharmaceuticals, drug spending accounted for between 15 and 32 percent of their total DOC health budgets in fiscal year 2015. Texas, the 11th state, spent 7 percent. For context, drugs accounted for 10 percent of national health expenditures in calendar year 2015.

16 DOCs work with eligible hospitals and other health care providers to obtain some of their high-cost drugs through the federal 340B drug-purchasing program. Carving out even a few such drugs from a DOC’s overall purchase can reap financial benefits.

DOCs buy many of the same drugs as do Medicaid agencies, with the bills for both groups ultimately paid by taxpayers. Yet DOCs are not eligible for the federal Medicaid Drug Rebate Program, which requires drug manufacturers to enter into a rebate agreement in return for Medicaid coverage of their products.

A comparison of the highest-cost drugs bought by large employers for their covered employees and families, by Medicaid agencies for their enrollees, and by DOCs for incarcerated adults shows significant overlap in the conditions treated by all three. The latter two, especially, share a higher-than-average prevalence of diabetes, asthma, hepatitis C and HIV, mental illness, and substance use disorders.

Prison health care sits at the intersection of pressing state priorities. From protecting public safety to fighting disease and promoting physical and behavioral health, and from fine-tuning budgets that trim waste to investing in cost-effective programming with long-term payoffs, the health care that prisons provide to incarcerated individuals and the care that prisons facilitate post-release is a critical linchpin with far-reaching implications.

The Centers for Medicare &amp; Medicaid Services (CMS), a unit of the U.S. Department of Health &amp; Human Services (HHS), released new guidance in April 2016 on how states and localities may facilitate access to Medicaid coverage for individuals before, during, and after a correctional institution stay.

Effectively administering health care programs is a critical element of sound fiscal management for state and local governments. As health care and corrections have emerged in recent years as fiscal pressure points, so too has the intersection of these two spheres—health care for inmates. The manner in which states and localities manage prison and jail health care services affects taxpayers’ total corrections bill, as well as inmates’ well-being, and the public’s health and safety. Pew conducts research on state and local correctional health care spending and performance to help policymakers access the information they need to make data-driven policy decisions.